Online banking still favorable

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Online banks are a great convenience and have a history of paying better interest, but with so many traditional banks getting in on the act with their own online accounts, the distinctions are less pronounced.

According to our 2009 Checking Study, you still have to pony up a larger deposit to open an account online than you will at the brick-and-mortar bank down the street.

The online average this year to open an interest-bearing checking account is $681.50 as compared to the average $473.12 to open a similar account at a traditional bank.

Comparison of average minimum to open

But after that, the benefits of an online bank account versus one at a traditional bank tilt in favor of online. For instance, the minimum balance required to avoid a monthly service fee is $812.50 online, while it’s $3,372.18 at a brick-and-mortar bank. The fee assessed online should you fall below that balance is $3.75 as compared to $12.55 at a traditional facility.

Balance requirement for interest checking

As you would expect, the yield on an online account is better, 0.69 percent as compared to 0.12 percent at the brick and mortar.

Average yield

If noninterest checking fits your needs, you’ll find the average minimum to open is $140 versus $68.32 at standard banks.

But the average online nonsufficient funds fee, or NSF, is $29.78, a wee bit higher than the traditional banks’ average of $29.58.

Methodology surveyed the five largest banks and the five largest thrifts, based on deposits, in the top 25 metropolitan markets across the country. We looked at one interest and one noninterest checking account from each institution where available. In all, there were 245 interest accounts and 228 noninterest accounts from 248 institutions. In addition, 16 interest accounts and five noninterest accounts were surveyed from 17 online banks. The surveys were conducted during August 2009.

Most consumers can avoid the fees we’ve addressed in this report with just a little bit of effort. Read the Bankrate feature “6 tips to avoid checking account fees” and start saving money.

Check out the results of our 2009 Checking Study for more information.